We already knew that Nobel Prize winner Paul Krugman knows almost nothing about economics. Now, we see from this article that he knows nothing about banking either.

Krugman claims that the repeal of Glass-Steagall and the actions of banks in general were not the cause of the 2008 financial crisis. The conventional wisdom is that Lehman Brothers, Bear Stearns and AIG caused the crisis.

They were all non-banks. The big banks (JPMorgan, Citi, BoA) all survived the crisis. Therefore, banks were not the problem.

This narrative ignores two obvious truths. The first is that the banks were on their way to failure also, but were bailed out. The crisis was not a story of prudence v. recklessness; it was a case of selective bailouts. I learned this the hard way at LTCM, the hedge fund that was rescued during the financial crisis of 1998. When we did our internal post-collapse white paper in late 1998, we concluded that our only mistake was not being a bank with a Fed lifeline.

The second truth is more subtle. It’s true that Bear and Lehman had many of the bad mortgage loans on their books. But, does anyone stop to ask how those mortgage positions were financed? The answer is big banks.

I was an expert witness in a case involving Bear Stearns and Bank of America. I can’t say much because of a gag order. Suffice to say that Bear had over $2 billion of mortgages financed by Bank of America. Without that financing, those positions simply could not have existed. When Bear went down, BoA took possession of the collateral (at a nice spread) and realized the spread as profit over time once the Fed bailout facilities were in place.

During the 2016 primary season, Bernie Sanders blamed the repeal of Glass-Steagall and the role of the banks for the financial crisis. Hillary Clinton said the banks were not to blame, and that the repeal of Glass-Steagall played no role in the crisis.

Glenn Kessler of the Washington Post, known as “Mr. Fact Checker” who gives out Pinocchios for false claims, called me to referee the Sanders-Clinton dispute. I walked him through this same analysis and said that Sanders was right. The next day, the Washington Post ran his column saying that Hillary was right. That’s when I knew Kessler was a phony and the process was rigged against Bernie (and it still is).

In the meantime, we’ll have to put up with false narratives from Paul Krugman and friends.